Social Conflict Costly for Korea

Social Conflict Costly for Korea

Payment for land is vital to both labor and capital, as Korea shows. We trim, blend, and append three 2009 articles on Korea from: (1) ChinaView, Jun 19; (2) Reuters, Jun 19, by Jack Kim; and (3) Korea Times, Jun 24, by Kim Tae-gyu.

by ChinaView, by Jack Kim, and by Kim Tae-gyu

S Korea, DPRK wrap up latest talks over joint venture

The third round of talks since the inauguration of the Lee Myung-bak regime between South Korea and the Democratic People’s Republic of (North) Korea (DPRK)’s delegation concluded.

It was held in Kaesong (in the North), where 106 South Korean companies operate with some 40,000 DPRK workers, making a variety of products, from electronics and watches to shoes and utensils.

Earlier, DPRK asked South Korea to quadruple monthly wages for workers from $70-$80 to $300, as well as raise land rent to $500 million, a 31-times increase from the current $16 million. That rent is one of the few sources of hard cash for the destitute communist state.

Following previous talks on April 21 and June 11, the two sides met after South Korean President Lee Myung-bak called Pyongyang’s demands “unacceptable” in a summit with US President Barack Obama earlier this week. The DPRK strongly denounced the comment.

The delegation from the South focused on the South Korean worker who has been detained in the DPRK since late March and proposed a joint survey of foreign industrial parks.

The DPRK did not provide any information on the detained worker but said they intended to lift the traffic curfew in the industrial park which slows the movement of materials and workers.

Both sides agreed meet again July 2.

Two Koreas talk, US tracks ship

The US Navy was tracking a North Korean ship, the first shadowing under the UN sanctions adopted after Pyongyang conducted a nuclear test May 25 that put it closer to having a working atomic bomb.

The sanctions bar Pyongyang from trading in weapons, including missile parts and nuclear material. “North Korea will endlessly try to export arms. (That) is a very profitable business compared to other goods,” said Cho Myung-chul of South’s Korea Institute for International Economic Policy.

North Korea warned it could fire another intercontinental ballistic missile, toward Hawaii, in defiance of UN resolutions. That could be part of efforts to consolidate leader Kim Jong-il’s power in preparation for succession in Asia’s only communist dynasty.

US Defense Secretary Robert Gates said he had redeployed anti-missile assets in the Pacific region, including advanced radar and other defensive systems that might succeed in bringing down medium-range ballistic missiles.

North Korea in April fired what it said was a rocket to put a satellite in orbit, but regional powers said the launch was actually a disguised test of the long-range Taepodong-2 missile, designed to fly as far as US territory. The rocket flew about 3,000 km (1,860 miles), well short of the 7,000 km needed to take it to Hawaii.

Social Conflict Costly for Korea

In social conflicts, South Korea ranks fourth worst among member countries of the Organization for Economic Cooperation and Development (OECD). The Samsung Economic Research Institute (SERI) claims social conflicts cost Korea up to $250 billion a year in GDP. Many analysts said the figure is too high, nearly 20-25% of GDP, but they agreed the cost is quite high.

“For 27 OECD nations, the average is 0.44,” SERI researcher June Park said. Only three states, Turkey, Poland, and Slovakia, chalked up worse figures than Koreas 0.71.

European countries, especially those in Scandinavia, scored best: Denmark led with 0.24, followed by Sweden with 0.25, and Finland with 0.28. France and Britain were in the middle at 0.38.

Japan’s figure was 0.42 while that of the United States was 0.44, the average.

Park said the causes of Korea’s severe social throes are political feuds, militant trade unions and “rent-seeking” activities of government officials. Reducing the index to the average means the nation’s GDP per capita would jump from last year’s $18,602 to about $24,000.

Communications consultant Michael Breen asked “opinion leaders to articulate goodness of individualism, civic rights and responsibilities, the free market, and the rule of law. It is also important to replace the idea that democracy means rule by public sentiment with the notion of representative democracy.

An American asset manager working here said, Frequent social disputes are one of main reasons behind the Korea Discount along with North Korea’s threat.

JJS: Sounds like a job for geonomics. Places that have recovered rents and spread land ownership enjoyed less crime and less militancy. Korea has taxed land somewhat and even has a small Georgist (geonomic) movement, so dont count out the best basic idea for progress!

Our editor published The Geonomist which won a Californian GreenLight Award, has appeared in both the popular press (e.g., TruthOut) and academic journals (e.g., USC’s Planning and Markets), been interviewed on radio and TV, lobbied officials, testified before the Russian Duma, conducted research (e.g., for Portland’s mass transit agency), and recruited activists and academics to the Forum on Geonomics. A member of the International Society for Ecological Economics and of Mensa, he lives in America’s Pacific Northwest.

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Arts & Letters

Geonomics is …

a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.

the study of the money we spend on the nature we use. When we pay that money to private owners, we reward both speculation and over-extraction. Robert Kiyosaki’s bestseller, Rich Dad’s Prophecy, says, “One of the reasons McDonald’s is such a rich company is not because it sells a lot of burgers but because it owns the land at some of the best intersections in the world. The main reason Kim and I invest in such properties is to own the land at the corner of the intersection. (p 200) My real estate advisor states that the rich either made their money in real estate or hold their money in real estate.” (p 141, via Greg Young) When government recovers the rents for natural advantages for everyone, it can save citizens millions. Ben Sevack, Montreal steel manufacturer, tells us (August 12) that Alberta, by leasing oil & gas fields, recovers enough revenue to be the only province in Canada to get by without a sales tax and to levy a flat provincial income tax. While running for re-election, provincial Premier Ralph Klein proposes to abolish their income tax and promises to eliminate medical insurance premiums and use resource revenue to pay for all medical expense for seniors. After all this planned tax-cutting and greater expense, they still expect a large budget surplus. Even places without oil and gas have high site values in their downtowns, and high values in their utility franchises. Recover the values of locations and privileges, displace the harmful taxes on sales, salaries, and structures, then use the revenue to fund basic government and pay residents a dividend, and you have geonomics in action.

a study of a phenomenon David Ricardo noted going on two centuries ago. When wine grapes rise to $10,000 a ton from the very best land (last year, cabernet sauvignon commanded an average of $4,021 a ton in the Napa Valley), then vineyard prices soar from $18,000 an acre in the 1980′s to $100,000 an acre five years ago and now for a top pedigree up to $300,000 an acre (The New York Times, April 9, via Wyn Achenbaum). Pricey land does not make wine pricey; spendy wine makes land spendy. While vintners make their wine tasty, nature and society in general – not any lone owner – make land desireable. Steve Kerch of CBS’s MarketWatch (April 5) notes that much of what a home sells for on the open market is a reflection of intangible factors such as what school district the house sits in. The price the builder has to pay for the land also tends to be driven by the same intangibles. Because the value of land comes from society, and because one’s use excludes the rest of society, each user owes all others compensation, and is owed compensation by everyone else. Sharing land’s value, instead of taxing one’s efforts, is the policy of geonomics.

an alternative to conventional land trusts. Just as it seems some functions should not be left to the market – private courts and cops invite corruption (while private mediation is fine) – just so some land should not be left in the market. That said, sacred sites do not make much of a model for treating the vast acreage of land that we need to use. So the usual trust model, which is anti-use and counter-market, can not apply where it’s needed most. Trust proponents worry about ownership and control – two very human ambitions – but they’re not central. Supposedly, we the people own millions acres – acres that private corporations treat as private fiefdoms – and conversely, the Nature Conservancy owns wilderness the public can some places use as parks. So, the issue is not who owns but who gets the rent – ideally, all of us.

not a panacea, but like John Muir said, “pull on any one thing, and find it connected to everything else.” Recall last month’s earthquake in El Salvador. We felt it and its formidable after-shocks in Nicaragua. Immediately afterwards, my host nation, one of the poorest in the Western Hemisphere, sent aid to its Central American neighbor. The Nica newspapers carried photos of the devastation. They showed that the cliff sides that crumbled had had homes built on them while the cliffs left pristine withstood the shock. Could monopoly of good, safe, flat land be pushing people to build on risky, unstable cliffs? If so, that’s just one more good reason to break up land monopoly. What works to break up land monopoly, history shows, is for society to collect the annual rental value of the underlying sites and resources. That’d spur owners to use level land efficiently, so no one would be excluded, forced to resort to cliffs. To prevent another man-induced landslide is yet another reason to spread geonomics.

a study of Earth’s economic worth, of the money we spend on the nature we use, trillions of dollars each year. We spend most to be with our own kind; land value follows population density. Besides nearness to downtowns, we also pay for proximity to good schools, lovely views, soil fertility, etc. These advantages, sellers did not create. So we pay the wrong people for land. Instead, we should pay our neighbors. They generate land’s value and deserve compensation for keeping off ours, as they’d pay us for keeping off theirs. It’s mutual compensation: we’d replace taxes with land dues – a bit like Hong Kong does – and replace subsidies with “rent” dividends to area residents – a bit like Alaska does with oil revenue. Both taxes and subsidies – however fair or not – are costly and distort the prices of the goods taxed and the services subsidized. By replacing them and letting prices become precise, we reveal the real costs of output, the real values of consumers. Then, just by following the bottom line, people can choose to conserve and prosper automatically. A community could start by shifting its property tax off buildings, onto land – a bit like a score of towns in Pennsylvania do; every place that has done it has benefited.

a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old log-gers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.

not exactly Georgism, the Single Tax on land value proposed by Henry George. He did, tho’, inspire most of the real-world implementations of the land tax that some jurisdictions enjoy today, and modern thinkers to craft geonomics. While his name and our remedy both begin with “geo” since both words refer to “Earth”, the two have their differences. (a) George pegs land monopoly as the fundamental flaw while geonomics faults Rent retention. (b) To fix the flaw, George was content to use a tax, while geonomics jettisons them in favor of price-like fees. (c) George focused on the taking while geonomics headlines the sharing. George envisioned an enlightened state judiciously spending the collected Rent while geonomics would turn the lion’s share over to the citizens via a dividend. (d) And George, as was everyone in his era, was pro-growth while geonomics sees economies as alive, growing, maturing, and stabilizing. Despite these differences, George should be recognized as great an economist as Euclid was a geometrician.

in part the Great Green Tax Shift maxed out. Economically, taxing pollution and depletion does reduce pollutants and extracts – and thus the tax base; plus such taxes are regressive, requiring a safety net. On the other hand, collecting site rent is progressive and generates a revenue surplus payable as a dividend to residents, which can serve as the safety net. Environmentally, taxes on waste and extraction do not drive efficient use of land, as does getting site rent.

a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old loggers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.

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Thoughts for the Day

The best government is that which teaches us to govern ourselves.

Johann Wolfgang von Goethe

It’s the friends you can call up at 4 a.m. that matter.

Marlene Dietrich

To prevent government from becoming corrupt and tyrannous, its organization and methods should be as simple as possible, its functions be restricted to those necessary to the common welfare, and in all its parts it should be kept as close to the people and as directly within their control as may be.

Henry George

Even if you’re on the right track, you will get run over if you just sit there.

Will Rogers

The man who is not a socialist at twenty has no heart, but if he is still a socialist at forty he has no head.

Aristide Briand

Kind words do not cost much. Yet they accomplish much.

Blaise Pascal

History will be kind to me for I intend to write it.

Winston Churchill

Everything should be made as simple as possible, but not one bit simpler.